IF THE euro-area debt crisis worsens, it will drag down growth in emerging economies. The good news is that whereas most developed countries have little or no room to cut interest rates or to increase public borrowing, emerging markets as a group still have lots of monetary and fiscal firepower. This chart, based on an analysis by The Economist, ranks 27 emerging economies according to their policy wiggle-room.

We used five indicators to assess each country's ability to ease monetary policy: inflation, excess credit (the growth in bank lending minus the growth in nominal GDP), real interest rates, currency movements and current-account balances.Each country was graded on the five indicators, and the scores were then summed to produce an overall measure of monetary manoeuvrability. Next we devised a fiscal-flexibility index, combining government debt and the budget deficit.

The average of the monetary and fiscal measures produces our overall “wiggle-room index”. Countries are coloured in the chart according to our assessment of their ability to ease policy: “green” means it is safe to let out the throttle, and “red” means the brakes need to stay on. It suggests that China, Indonesia and Saudi Arabia have the greatest capacity to use monetary and fiscal policies to support growth. Chile, Peru, Russia, Singapore and South Korea also get the green light. At the other extreme, Egypt, India and Poland have the least room for a stimulus. Argentina, Brazil, Hungary, Pakistan Turkey and Vietnam are also in the red zone.

Click on the tabs at the top of the chart to see rankings of individual indicators.

The Economist presumably referenced MSCI, the index compiler that just recently decided whether to upgrade South Korea and Taiwan from emerging to developed market status in its annual review of country classifications.

Believe it or not, the mood in the local markets was unwelcoming of any potential upgrade, as many traders worried that capital flows would be erratic as emerging portfolios swung out and developed ones swung in. Sharp changes in investment flows are Korea’s primary fear and this fear has manifested itself in a series of capital controls.

MSCI eventually held back on upgrading South Korea and Taiwan, citing accessibility issues in both markets, in particular the lack of full currency convertibility, including the absence of active offshore currency markets, and issues linked to the rigidity of the ID systems.

As for Hong Kong, considering that it's not only politically under the sovereignty of the PRC, but is also rapidly becoming more and more economically and demographically "Mainland-erized" each day, I'd say labeling it as a developing market would be a prescient move.

This is good stuff thanks to the Economist. And not to take away anything from it, it’s more useful to me than the McDonald index.

Now if you allow me to nitpick, being engineer rather than economist in training, it’s intuitively easier to understand the fiscal-flexibility index (the overall) chart if you’d plot the complement of all indices and setting 100 as maximum instead.

For example, under the max. indices scheme,

Egypt and India will get index of 15 each instead of 85;
Argentina and Hungary will get index of 30 each instead of 70;
Russia and Singapore will get index of 70 each instead of 30;
Indonesia and Saudi Arabia will get index of 85 each instead of 15;

And so forth. People usually associate 100 being a perfect score than a zero is.

Are you sure? In this chart, the higher the score, the less freely a country can manipulate its policy. Since Brazil has a much higher score than Russia, I can't see how "the Economist" downgrades Russia and upgrades Brazil in this chart.

According to the IMF, Hong Kong has a higher per capita GDP than the USA and almost 6 times greater than the rest of China. (Honkers also has the second highest life expectancy in the world; 82 years compared to 78 for USA and 73 for PRC.)